Automobile insurance companies recently won yet another victory in Michigan courts. In Ruzak v. USAA Insurance, the Michigan Court of Appeals ruled that insurance companies can reduce liability coverage of $300,000 per person and $500,000 per auto accident to the statutory minimum of $20,000 per person and $40,000 per auto accident, when that coverage applies to an insured’s resident relative. This means that if the injured person is a member of the at-fault driver’s family and resides in the same household, the insurance company may not have to pay the full amount of liability coverage.
The intra-family limitation clause
Ruzak involved a contract provision commonly referred to as an intra-family limitation clause. Insurance companies use the provision to limit the amount of money they will have to pay if their insured injures a family member in a car accident. The specific provision used by USAA stated:
There is no coverage for [bodily injury] for which a covered person becomes legally responsible to pay a member of that covered person’s family residing in that covered person’s household. This exclusion applies only to the extent that the limits of liability for this coverage exceed $20,000 for each person or $40,000 for each accident.
The provision is another example of the Michigan courts favoring wealthy insurance companies over car accident victims. The decision gives Michigan insurance companies one more way to circumvent their duty to pay the coverages they sell. This is all particularly distressing, not only because the court precedent affects the families of the people who are paying the premiums, but because very few people realize their policy contains an intra-family limitation clause until after an accident has occurred.
Personal injury lawyers take note
The plaintiff in Ruzak was a passenger in a truck driven by her husband. She was injured when her husband lost control of the truck and struck a tree. Although her husband’s negligence was beyond dispute, USAA refused to pay the $300,000 liability coverage provided in her husband’s insurance policy. Instead, USAA relied on the intra-family limitation clause and offered the plaintiff only $20,000. The trial court found the provision “unconscionable” and ruled in favor of the plaintiff. But the Michigan Court of Appeals disagreed and reversed the trial court’s decision.
What is most disturbing about the decision is that the Court of Appeals held that the intra-family limitation clause was not unconscionable, and that limiting coverage to $20,000 did not “shock the conscience” because it complied with Michigan’s statutory minimum — even though the plaintiff’s husband had specifically purchased insurance with a high policy limit of $300,000. Although the clause was buried within the exclusions section of the insurance contract, the Court further justified its decision by claiming the plaintiff’s husband could have sought coverage from another insurer without the provision. This assumes he actually knew about the intra-family limitation clause, and that he read and understood it.
Advice for Michigan residents
To ensure that you and your family are adequately protected, our auto accident attorneys strongly recommend that you read your entire insurance policy and ask your insurance agent to explain anything you do not understand. You can also ask your insurance agent if your policy contains any provisions that can limit what the insurance company must pay if a family member is injured in a car or truck accident. If your policy contains an intra-family limitation clause, you can always seek coverage from another insurer.